Banco Bpm Societa Ord

Good evening, this is the Coruscall conference operator. Welcome and thank you for joining the Banco BPM full year 2025 group results presentation. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Arne Riscassi, IR Manager of Banco BPM. Please go ahead, sir.

Good afternoon and welcome to Banco BPM full year results conference call. Our CEO, Giuseppe Castagna, and our Joint General Manager, Eduardo Gineo, will take through the presentation. And let me remind you, please, to limit yourself to two questions. And now I hand over to Mr. Castagna. Thank you.

Thank you, Arne. Good evening to everybody. For once, we are the only one in the evening, so we'll take our time, but I will try to be as quick as possible in order to give you the possibility to make an interesting Q&A session. So, first slide on page six, I will start. This is just a recap of the completion. We are more and more having on... our new business model, which, as you know, started a couple of years ago with the intention to build a business model driven by the product factory and able to hedge the contribution of commission and fees vis-a-vis NII revenues. I would say that this model is becoming more and more attractive. We are completing, basically, the different product factory steps. We will go through each one later on. But let me say that with this business model, we were able to support a very strong profitability, which with this split 50-50 interest income and commission is of course more sustainable for the next quarter and years. The results of 2025 was 2 billion, 80 million, 130 million higher than the guidance I gave you in the last quarter. Also, with the strong increase in terms of common equity at one, performed at 13.76%, versus, as you may remember, a planned minimum threshold of 13%. These results allow us to match the dividend per share of one euro, which we gave last year. So the balance dividend would be 54 cents, 17% higher than the first interim dividend, 46 cents. The payout ratio is still 80%, considering for this year, Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord remuneration 24-25 reached 3 billion which is exactly half the strategic plan community target which is already achieved after a couple of years. Some further numbers which give you the sense of where we stand in terms of where we wanted to reach with our presentation of business plan in February last year As I mentioned before, we are already at non-NIIA revenues, on total revenues, 51%, cost-income ratio 46%, gross NP ratio 2.2%, and cost of risk at 40 basis points. On page 7, the pro forma net profit is higher because, of course, we are not considering in the stated accounting the first quarter in which we did not consolidate ANIMA So if we have a pro forma with consolidation animal, the net profit, the net profit would have been 2.120 million. If we compare, as I mentioned before, the 24 to 25 net profit, we have an increase of 20% excluding in 24 new transaction and solidarity one off. So retired funds one off. and the 1,880,000,000 which reached this year excluding animal one-off is a 20% increase in net income, which of course accounts for almost 20.5% of ROTE and 15.5% of ROE. The organic improvement was so high to offset completely in the Euribor reduction of this year. We started from a profit from continuing operation pre-tax of 2.5 billion in 2024. We have a total reduction in NIF at full funding cost of 200 million, a further reduction in NFR of 56 million, which were completely compensated by organic improvement coming from non-NII core, specifically commission and insurance, and a reduction of operating costs and provision. Like for like, so we have a plus 2 billion 550 million to which we add 263 million related to the integration of Anima starting from Q2. If we include also the first quarter of Anima, our profit from continuing operation would stand at 2.9 billion. So let's have a look to the composition of the profit and loss. We have a growing revenues in terms of total revenues from 5.7 to almost 6 billion. As I mentioned before, non-NII revenues on total revenues is 49% for pro forma, but 51% considering NII at full funding cost. Net fees and commission raised 21% to 2.5 billion starting from 2.055 million of last year. And the same strong increase of almost 60% comes from income from associates would grow from 200 million to 330 million. The Q4 was the first positive quarter of the last year in terms of core revenues, which grew almost 5%, thanks, of course, mainly to fees, but also to a higher contribution, Q4 and Q3 of NII. the same favorable trend we are experiencing cost control like for like we have reduction in cost of 1.7% which of course proforma takes in account also the impact of anime Significant decline also in provision where we reduced the total provision 26% with LLPs going down from 46 basis points of cost of risk to 40 basis points. Just a quick deep dive on risk profile. As you may remember, this was the main difference that we had when we started The merger, we had an MPE ratio of 22.5% vis-à-vis an average of the Italian bank at 15% and an average of the EU bank at 5%. As you can see, in the last three years, we have deducted massively this amount. And now we are at 2.2%, which is exactly in line with the Italian banks. and slightly above the 1.8% of the European average. Let me also remember that we were basically one of the few banks who didn't make recourse to the market to offset the MPE. In the same period, in the same nine-year period, we assumed that there were at least more than 25 billion of share issue in order to offset the MPE. from other banks. Also, the stock has a low record. We have now a 2.2 billion, 250 million of GBP, decreased by 600 million, which is a 21% reduction. And net MP went down 0.37 point to 1.2%. and basically we have zero bad loan if you exclude bad loans covered with state guarantees. We in the same time have also the higher NPE coverage because we increased for 52.5% to almost 56% the total coverage excluding again the state guarantee and also the vintage of our NPE portfolio has been reduced to less than two years. the default rate was 0.84% and we managed also to reduce 1.1 billion the stage 2 loans which now stands at 8% of total performing loans. Capital generation, we were able to generate 194 basis points after absorbing more than 260 basis points related to 1.5 billion of dividend distributed we have a sort of road of the common equity tier 1 during 25 which you know you may remember has been massively eaten by the animal acquisition not getting Danish compromise this accounted for 240 basis points on our capital to which we had 60 basis points of regular headwinds totaling 300 more than 300 basis points so with a starting point rebased in 2024 12% to this we had the capability to generate 176 basis points which brought the total to 13.76% to which we had to deduct the one-off levy on extra profit reserve which accounted for 18 basis points bringing the stated common equity tier 1 to 13.58% we managed in January to have some hedging on Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord Bpm Societa Ord and generate such a consistent amount of capital as we did basically from nine years, every year of setting the losses that we had in reduction of MP, you can understand that the capital generation for the future will not be a problem. We are very confident to return very soon at a 14% level. Let's go into some detailed figure on page 12. We have the spreadsheet of Q4 and Q3 and full year 25 and full year 24. As I mentioned before, Q on Q, we have the first time of positive results of net interest income 1.3% higher than Q3. Net fees and commission 7.5% higher than Q3. Of course, it's a bit more difficult to make a comparison year on year because we have the contribution of Anima nine months this year. But anyway, we have a 21% of higher net fees and commission to 2.5 billion. Another quite remarkable contribution is coming from income from insurance, where year on year we pass from 116 million to 163 million. Core revenues went up 5% Q on Q and 2.5% to year on year considering more than 300 million reduction in NII year on year. Net financial results was 48 million positive due specifically thanks to the cost of certificates which went down to 167 million compared with 284 million last year. Total revenues went up to almost 6 billion compared to 5.7 billion last year and Q&Q went up 1.1%. As I mentioned before, we have a slightly increase in operating costs, but this is driven by the Anima Impact, which was not present in 24. If we compare like for like, we are down in cost 1.7%. Total provision down from 547 million to 403 million. Quarter on quarter, we have instead an increase, which is a seasonal increase of total provision to 160 million from 81 million. profit from continuing operation, pre-tax profit were 2.8 billion year on 25 compared to 2.5 billion 24, so 12.5% growth. Net profit from continuing operation is 17.4% growth with again a considerable growth also net income more than the figure that is shown on the page 12 of 2.8 billion compared to 1.9 billion. Maybe it's more effective to compare the two years without the one-off I mentioned before. Again, it's 1.880 million against 1.570 million, a growth of 20% year on year. On the right side of the slide, you can see how we managed, we were able to manage, and we will go through afterwards, the NII. Of course, there was a massive reduction in NII, but if we consider the NII at full funding cost, so with the contribution of the lower cost of certificates, we managed to keep the reduction 25 on 23 at only 2.2%. with 200 million reduction from 24 to 25. And you can see how the impact of commission basically is now higher than the impact on NIA in 25, growing to almost 3 billion from 2.3 billion of 23. So you can see the non-NIA revenues growing from 43% to more than 50%. Cost income down to 46% from 48%. Again, I mentioned already both the LLPs and net profit from continuing operation, which grew 38%, which is quite massive if you consider the reduction of NAI. Again, net interest income, specifically a reduction of 9% year-on-year, which is 1.3% positive on quarter. at full funding cost the reduction was only 6.2% and the results of the last quarter was justified by the increase of three basis points in Euribor which we were able to take in our commercial spread up to two basis points almost all the entire Euribor increase Specifically, we grew two basis points in the liability spread, maintaining at 1.47 the asset spread. The managerial action sensitivity basically reached the top as it was already in Q3. We are not edging anymore, both in terms of replicating portfolio due to the consistency of Euribor during the last months, as well as also the index of current accounts that were stable at 37% vis-a-vis 34% of last year. Also, there was a reduction on sensitivity rate at 150 million. Finally, on the last bottom right part of the slide, you can see how a strong help in NII came also from the reduction of the wholesale issue. in last year basically we reduced from the beginning of 24 to the last emission we were able to reduce the average of the wholesale ball spreads of 60 basis points which accounts for almost 35 million per year so that means that we have a lower cost of risk of lower cost for our issuing going on towards the end of the plan You can see how for each kind of issue there was a reduction based from the last issues related to the previous one. A good signal finally Q4 also from loan volumes. Of course there was all the year a strong generation of new lending up to 28 billion, 7 billion higher than last year. showing our constant presence close to the client make us take an advantage also in a period in which there is not long growth. We were able, of course, to foster a lot of new loans, taking an important share of commission coming from new lending. Specifically, new lending to households grew 40% year-on-year and to non-financial corporates grew 30% year-on-year. Also, in terms of low-carbon new money long-term financing, we were up to 7.6 billion compared to 5.7 billion of last year. As far as the stock is related, the Q4 was 1.2 billion up Q3 growing basically in all the different asset class non-financial corporate household and financial meanwhile when you compare with December 24 we were able to have a positive increase both in household and non-financial corporates meanwhile as you may remember we have only one institutional big ticket transaction amounting from 1.5 billion which impacted the reduction of 1.3 billion related to the institutional lending on the right side some quality description 73% of our core customer loan located in north of Italy we still continue to take a lot of advantage from the collateral of our loans, 52% are secured, 27% with state guarantee and if you go to SMEs, 63% are with collateral and more than 90% of the risk are concentrated in the best class from mid to low risk. Net fees and commission is the game changer of this year thanks not only to the animal contribution, but also to a growth of 5% normalized for the eco bonus reduction commission 25 of 24. As you can see, we passed from 2.055 million of 24 to 2.5 billion of 25. And this again, make clear the share of investment product fees passing from 36% to 49% of the total commission. You can have some detail on the right side of the slide. In the upper part, there is an investment product free growth 11% year on year, like for life. So without animal contribution, which of course became 1.2 billion, if you consider also the contribution of animal, which brings to more than 50% of the contribution of the asset management and wealth management fees. Also in terms of investment products placement, we grew 12% in line with the growth of the commission. On the other commission, we were able to contain the reduction at 1.9% which if we exclude the echo bonus impact on 24 became a growth of 1.2% specifically from having good results and increasing results, especially from P&C insurance, consumer credit, corporate investment banking commission, structural finance commission. Meanwhile, some reduction in, as I mentioned before, in echo bonus and instant payments and in the payment system activity. Let's make a quick focus on the insurance business. As you know, it's been one of the core pillars of our strategic plan. In the last two years, we have done a lot of work integrating 100% the life business and creating the new joint venture with Agricola in PNC. This year, we had both the IT migration of life and non-life, one run directly by us and the other one run by our partner of AgriCode. So, of course, as always in this case, you always experience some reduction in sales. Basically, it was not so much the case because if you see the contribution of the insurance business, this grew year on year 26%. from 255 million to 320 million with a pace which is much quicker than the pace that we need to reach the target in 27. Basically, in the last year, we had the same increase that we expect for the next two years. If we go through the different kind of insurance, life insurance grew 27%. Commission were up to 70 million from 67 million but what was really affecting these results was the income from the insurance business keeping of course now all the income coming from this kind of business which grew from 116 million of last year to 163 million of 25 which is almost in line with 175 million, which we have as a target in 2027. Let me remember that in 23, this business contributed only for 46 million to our profit and loss. As far as P&C is related, we have the same growth up to 23%. coming from 71 to 88 million. And again, definitely we are not yet at the final speed that we assume we can take in 26 and 27. A quick focus also on Anima and all the total customer financial assets, which in terms of captive volumes grew more than 13.7 billion in 2025 and more than 25 billion in the last two years. So a really remarkable growth. As you can see, last year we had a big impact also from net inflows. Asset under management grew 2.3 billion, asset under custody 3.5 billion and current account and deposit grew almost 5 billion. we can see almost the same pace if we consider the total customer financial asset held by our group which now amounts to almost 400 billion is 396 billion starting from 377 last year on a pro forma basis of course because we did not consolidate ANIMA last year with a growth of almost 20 billion year on year A final page on Anima. Of course, the most important piece of news is that we appointed at the end of January the new CEO, Mr. Paris Sinotto. And, of course, also the growth of Anima is quite considerable considering also the difficulties of last year managing from one side our acquisition the former CEO leaving in the last quarter and managing the integration of the new business into the group but Anima managed to grow 4% 8 billion year on year and growing 5% in terms of revenues and 16% in terms of net income so we are very happy of the contribution Anima is doing for us and we of course expect this figure bettering with the new management of the company let's go to the cost income down 46% thanks to a rigorous cost discipline that is now I would say quite a mark for our bank like for like we have the reduction 1.7% 46 million which of course including Anima is higher up to 2.7 billion. If we consider staff cost, we have a reduction of 1.5%, like for like. With Anima, we have a stated 1.8 billion. If we integrate also in the first quarter Anima, the figure would have been 1.825 billion but we assume that we are completely in target with the business plan which I may remember is 100 billion, 780 million because thanks to the retirement scheme we fostered last year we have already generated more than 1,000 exits and another 600 will be during the last two years this will generate 60 million of reduction of cost of personnel, only offset by 20 million of increase of national contract and new hiring that we are doing. Also in other administrative expenses, we have a quite strong reduction, 4.7% in terms of ASA, which instead we register a slight increase in depreciation and amortization due to the increasing amount of investment we are doing in IT and AI. Let me remember that the headcount that with Anima were performed more than 20,000 people beginning on 25 now are down to below 19,000 people. We have 18,970 people and a further reduction of 300 people is forecasted by the end of the plan. We already mentioned cost of risk, very good news in all aspects. Total down 600 million to 2,250,000,000 net bed loan down to 0.336%, which became 0.1% excluding state guaranteed loans. The cost of risk is down to 40 basis point, but this 40 basis point includes five basis point related to front-loading future de-risking for other 300 million, which with all regards to materialized during this year. Default rate at a low rate of 0.84%, increasing cure rate and, of course, decreasing net default rate. Also, the coverage is a record level for us. Without the state guarantee, we had almost 56% in MPEs and 77% of bad loans.